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Recruiting and retaining the best teachers has been identified as they key to school standards

Teachers' pay in England and Wales could be linked to performance and set at different local levels, under proposals set out by the government.

The Department for Education has submitted the suggestions to the independent pay review board.

Education Secretary Michael Gove says he wants a system that can attract the highest quality teachers.

Teachers' unions have already raised the prospect of industrial action against plans for regional pay.

"Reform of the current pay system for teachers is fundamental to driving up teacher quality," said Mr Gove.

He rejected the current system as "rigid, complex and difficult to navigate".

The House of Commons education select committee recently called for a pay system that reflected the different contributions of school staff.

"We are concerned that the pay system continues to reward low-performers at the same levels as their more successful peers," MPs reported.

'Local pay zones'

The Department for Education in Westminster submitted its proposals to the School Teachers' Review Body (STRB), which makes recommendations on teachers' pay for both England and Wales.

The timetable for the proposed changes would see the STRB responding in the autumn - with the secretary of state announcing a decision next year, which could apply from September 2013.

Mr Gove says that the quality of teaching is fundamentally linked to school standards - and that the pay structure should be designed to attract and reward the best staff.

But the suggestion of deregulation pay brought a wave of condemnation from teachers' unions, which say that it would be more likely to undermine than inspire teachers.

"Teachers are already suffering from pay freezes, job losses and increases in pension contributions - they now face pay cuts due to a policy based on ideology not evidence," said National Union of Teachers' leader Christine Blower.

The NASUWT teachers' union leader, Chris Keates, says the research evidence "demolishes the coalition government's case for local and regional pay".

The suggestions set out by the Department for Education are intended to create a stronger link between performance and reward.

It suggests options that could range from complete deregulation - where schools could create their own pay systems - to limited flexibility, with maximum and minimum pay bands.

The intention would be to allow schools more flexibility in using their budgets to target particular needs - whether for teachers in shortage subjects or as an incentive to keep the most effective staff.

It also raises the idea of different pay in different areas - with "local pay zones".

Mary Bousted, leader of the ATL teachers' union, questioned how an individual teachers' contribution could be fairly assessed.

She also highlighted a report earlier this week which argued that the international evidence did not show any clear link between performance-related pay for teachers and pupils' test results.